Natural gas rallies as weekly drawdown larger than forecast

LOS ANGELES (MarketWatch) — Crude-oil futures turned higher Thursday, with the move taking place as the U.S. House Speaker said he’ll continue to work with the White House to reach a budget deal.

House Speaker John Boehner’s pledge to keeping working with President Barack Obama came as he expressed confidence that his bill on limiting potential tax increases to Americans with incomes of more than $1 million will pass in the House.

Crude for February delivery
US:CLG3
rose 15 cents, or 0.2%, to $90.13 a barrel on the New York Mercantile Exchange. It had traded as low as $89.26 before the turnaround.

While Brent crude had also fought losses, the February contract
UK:LCOG3
eventually pulled back 16 cents, or 0.1%, to settle at $110.20 a barrel on ICE Futures in London.

Failing to avert the so-called fiscal cliff would be an “economic drag” and would “affect crude oil demand and supply,” wrote Bob van der Valk, an independent petroleum industry analyst based in Terry, Mont., in emailed comments.

The vote on Boehner’s tax bill, and a related measure to replace cuts to defense spending, is scheduled for Thursday night. President Obama has said he will veto the bill. Earlier Thursday, Senate Majority Leader Harry Reid said the Republican bill was a “nonstarter.” See: Republican 'Plan B' heads for House vote.

Jim Ritterbusch, president of oil advisory firm Ritterbusch and Associates, said oil during Thursday’s session found support from the “strong product markets” of heating oil and gasoline. “We’re still feeding off the fact that the Northeast region is looking at a short supply of gasoline and diesel fuel, heating oil.”

On Wednesday, the Nymex-traded January crude contract — now expired — closed up 1.8% after scoring four straight winning sessions. Government data showing an unexpected decline in U.S. distillate inventories helped support those gains. See: Oil futures score a fourth session of gains.

Are markets too complicated?

(4:04)

U.S. markets have become overly complex and opaque, and an overhaul is required to restore investor confidence, the heads of several of the largest trading venues told lawmakers.

The latest U.S. economic data also came into play, with traders searching through a raft of figures for clues on prospects for energy demand.

The Commerce Department said third-quarter gross domestic product grew at a seasonally adjusted annual rate of 3.1% in the third quarter, well ahead of the government’s initial estimate of 2% and its most recent tally of 2.7%. See: Third-quarter U.S. growth revised higher.

However, “GDP at 3% is still not sufficient to pull us out of our recession,” wrote van der Valk.

GDP constitutes “a poor guide to U.S. petroleum demand,” said Tim Evans, energy futures specialist at Citi Futures, in a note. Government data for the third quarter already showed that domestic petroleum consumption was off 1.9% from a year ago, he said.

On Wednesday, the Energy Information Administration reported that for the week ended Dec. 14, U.S. crude supplies dropped by 1 million barrels, narrower than the 2.3-million-barrel decline forecast by analysts polled by Platts.

Among Nymex-traded oil products Thursday, January heating-oil futures
US:HOF3
rose 2 cents, or 0.7%, to $3.06 a gallon, while January gasoline
US:RBF3
rose 1 cent, or 0.4%, to $2.75 a gallon.

Despite the increase in domestic supply of crude from the Eagle Ford and Bakken oil shale fields, fuel prices will still spike in the early part of the coming year “when refineries go into their turn-arounds to start producing the summer-blend gasoline,” said van der Valk.

Reuters

Natural-gas futures rise after EIA’s supply update.

The average U.S. price for a gallon of regular gasoline stood at $3.219 Thursday, down from $3.412 a month ago, according to AAA’s Daily Fuel Gauge Report.

In other energy trading, natural-gas futures gained more ground after the EIA reported a bigger-than-expected drawdown in last week’s supplies of gas in storage.

January natural gas
US:NGF13
climbed 14 cents, or 4.3%, to $3.46 per million British thermal units.

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